> This is a nice doomsday scenario, but the boom-bust cycles have also
> been tamed. So don't look for 15% GDP growth anytime soon; such
> booms have been outlawed by the Fed (precisely because of their
> instability leading to exactly what you posit). The real "miracle"
> of the stock market in the 90's has been the shifting of the "burden"
> of things like employee compensation away from earnings pressure
> and onto the shoulders of fund managers and individual investors.
Business cycles are a thing of the past, eh? I've heard that one before. The expansion of the finance sector has always been more rapid than the real sector; the stock market has risen an annual 7% a year or so since the late 19th century, and other credit and monetary indices would show similar liveliness. But the point is, we're seeing stock appreciation way, way above that 7% average. But the financial sector can't overexpand beyond the industrial base than a given industrial base can expand beyond the capacity of the financial sector (this latter is what happened in Japan). As far as stock options go, these are mostly concentrated in the hands of high-flying professionals, managerial elites and rentiers, not line workers. Only 40% of American workers even have the pension funds currently falling over themselves to invest in the Nifty Fifty. The rich and their favored hirelings get richer, but the vast majority of Americans make do with crappy service-sector jobs and get to watch the Dow rise on Chinese-made TVs.
> But back to 'real investment' -- as we shift out of manufacturing
> and into services, exactly what kind of 'investment' do you see as
> being something missing from the current phenomenon?
> Is it just because we're not building factories?
Corporations are building them in *other countries*, like Thailand and Mexico, is all. Wall Street's profits have fuelled a mighty foreign direct investment boom throughout the world, as well as equity bubbles in Mexico, Latin America, Thailand, Indonesia, South Korea, etc. But we're not paying those workers First World wages. Ergo, net demand has been diminishing, and real wages in America have, for most folks, been falling since 1973. It's the same story, rich getting richer, poor getting screwed, only on a global scale.
-- Dennis